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GAD Review


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GAD Review inaugural edition

Magazine edited by Amos Rojter, property of ICBI

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GAD Review

  1. 1. PLUS NEXT GENERATION AIRCRAFT, THE UK AIRPORTS COMMISSION, STATE AID FOR AIRPORTS, NEW TECHNOLOGY TRENDS & MORE THE BRAND NEW GLOBAL AIRPORT DEVELOPMENT PUBLICATION Air Travel 2040 Brian Pearce shares the latest thinking from IATA Global Privatisation Update India, Brazil, French Regional Airports and more Aeroporti di Roma A New Era – Marco Troncone talks exclusively to GAD Review
  2. 2. A fter a long period of economic and social adversity, which severely tested the city’s foundations as one of the world’s preferred leisure and business destinations, Athens is now dynamically re-emerging, with traffic numbers soaring, and foreign visitors reaching pre-crisis levels. The GAD Conference in Athens comes precisely at a time when Greece is a focal region for airport infrastructure development and privatisation. Three major structural reform projects form part of the Greece’s economic development programme this year, namely, the project aiming to capitalise on the stake held by the Hellenic Republic Asset Development Fund in the Athens International Airport; the ongoing tender for the privatisation of 14 regional airports; and the BOT tender for the new airport in Casteli, on the island of Crete. This is indeed a great time and place to host this conference: more than 350 industry leaders, 100 airport operators, and a network of powerful investors will connect to address the future prospects, and the numerous new challenges that lie ahead for the aviation industry. With airports being the first impression and “ambassadors” of a destination, and also significant engines for economic development, GAD serves as an excellent opportunity for constructive conversations among experts from the aviation and financial sectors. Let me welcome you once again to this very important event, wishing you a very successful conference and a memorable stay in Athens. Dr Yiannis N. Paraschis CEO - Athens International Airport Dear Colleagues and Friends On behalf of Athens International Airport, it is an honour to welcome you to GAD, the world’s key airport development and finance event, this year hosted in Athens. © 2014 GAD Review
  3. 3. 4 Best Wishes Heidi Stancliffe GAD Conference Director W elcome to the first ever edition of GAD Review, our brand new magazine for GAD, profiling some of the incredible airport executives and thought-leading investors speaking at GAD 2014 – and now throughout the year with our brand new GAD Asia sister event launching in June 2015. We promise you fresh ideas to challenge your thinking about the future of your business – what you do and how you do it. In our in-depth features we focus on some of the big themes that cut across the four content-and-networking intensive days of GAD 2014. Flick to the second half of the magazine to see the GAD 2014 Event Guide for four days of Social Events & Structured Networking, how to use the MyGAD Online Networking Platform and the fabulous GAD team ready to help and answer any questions. As Programme Director for GAD, I have the privilege of launching GAD Asia, a new sister event to GAD International, taking place in Kuala Lumpur in June 2015 and focussing exclusively on the high growth opportunities in this exciting region. I’m keen to hear what would make GAD Asia an unmissable event for you – what topics should the programme cover, who would you like to hear from and meet? Please reach out to me during the event or by email at any time. Looking forward to catching up with you over the next four days! Hellofrom the Global Airport Development Conference Director WELCOMETOGAD When you have finished with this magazine please recycle it.
  4. 4. 5#GADAthens CONTENTS © 2014 GAD Review WHAT’SINSIDETHISISSUE HIGHLIGHTS THIS ISSUE ■ Industry Outlook Brian Peace previews the latest aviation data from IATA. ■ Deal Pipeline Updates from key markets. ■ Aviation Trends Boeing’s Fariba Alamdari looks to the future. ■ CFO Interview Marco Troncone on Aeroporti Di Roma’s growth plans post acquisition by Atlantia. ■ Big Decisions The UK Airports Commission shortlist make their pitch to the GAD audience ahead of the big debate. ■ Regulatory Pressure Commentary from aviation investor Paul Whelan on the thorny issue of state aid for airports. ■ Digital Economy The airport of the future, with London City’s Patrick Burrows. MAGAZINE CREDITS GAD Review Editor: Amos Rojter GAD Sub-Editor: Elisabeth Wood Sarah Kelly GAD Conference Director: Heidi Stancliffe Business Development Manager: Ian Law Design & Layout: LockOn Productions Ltd. Publication Printer: Trio Offset Ltd. A New Look At The Next 20 Years Of Air Travel Brian Peace Global Airport Privatisations Sidharath Kapur French Regional Airports - A Long Way To Privatisation Jean-François Guitard Aviation In Brazil Rogério Teixeira Coimbra Airport Leader Interview Marco Troncone New Generation Aircraft Fariba Alamdari The London Airport Capacity Debate: Gatwick Airport Nick Dunn Heathrow Airport Nigel Milton Heathrow Hub Steven Costello View From A Regional Airport Paul Kehoe The Smarter Airport Experience Patrick Burrows Do State Aid Rules Need To Be Simpler? Paul Whelan PAGE 6 PAGE 8 PAGE 11 PAGE 12 PAGE 14 PAGE 16 PAGE 18 PAGE 19 PAGE 20 PAGE 21 PAGE 22 PAGE 23
  5. 5. 6 @GAirportD A NEW LOOK AT THE NEXT 20 YEARS OF AIR TRAVEL Brian Pearce, Chief Economist, IATA Forecasting is never an easy task. Most attempts are wrong. Airport investments are typically long-lived and immobile assets. Investors will not want them left stranded by unexpected changes in travel markets. © 2014 GAD Review GLOBALAVIATIONTRENDS S o peering into the future and trying to understand what factors may drive the pattern of future air travel cannot be avoided. IATA and Tourism Economics have just complet- ed a joint exercise in doing just this ( cast) and we will be presenting some of the results at GAD. The BRIC economies are obvious candidates to be the largest air travel markets in 20 years’ time. Indeed we expect the Chinese domestic market to add almost 700 million passengers annually by 2034, and China to be one end of the top-3 internation- al passenger markets where we forecast the largest increase in passenger numbers. But one of the BRICs, Russia, does not appear in the top-10 even by the early 2030s. Indonesia is expected to become the 6th largest market over this period and other non-BRIC economies, like Turkey, Mexico, Philippines, Colombia and Vietnam are expected to become major sources of air travel growth too. Another important conclusion from our joint assessment is that some of today’s mature but large markets will still be important for airport investors in 20 years’ time. The US domestic market will no longer be the biggest at that point, but we still expect it to add almost 400 million more passen- gers annually, and the US appears at one end of 3 out of the top-10 international growth markets. So why don’t we expect Russia to appear in the top-10, and why are Japan and Germany expected
  6. 6. to do relatively badly over the next 20 years? It turns out that there are going to be some spectacular demographic shifts over the next two decades. Russia, Japan and Germany are examples where the population is not just expected to shrink, but also to get older. That matters a lot for air travel since it is typically the population of work- ing age that flies the most. In contrast many African and Asian travel markets will benefit from demographic boosts, though not China, where the one-child policy will lead to an adverse shift in the country’s age structure. Developing markets like India and Turkey are much better placed in this regard. Nevertheless, China will still generate a very large increase in travel demand because its standard of living is expected to improve dramatically. China and a number of other, currently middle-income, economies like Brazil, Colombia, Malaysia and Turkey are expected to develop into being high-income economies over the next two decades. This will make a big differ- ence since as economies move above $13,000 GDP per capita, median propensity to fly rises from 0.2 trips a year per head of population to 1.2 trips. Our joint exercise focuses on these and the other factors that matter for the future of air travel. © 2014 GAD Review GLOBALAVIATIONTRENDS BRIAN PEARCE Wednesday 19th November, 9:00 The GAD 2014 Global Traffic Forecast SPEAKER SESSION DETAILS  Brian Pearce, is IATA’s Chief Economist. The role of his team is to analyse the economic and policy landscape facing the airline industry, to provide credible economic analysis to guide and support IATA’s advocacy work. An economist with almost 30 years of international experience in several industries, he is also a Visiting Professor at Cranfield University’s Department of Air Transport. He was formerly head of global economic research at the investment bank SBC Warburg in Tokyo and then London, and was Chief Economist at Ernst & Young’s economic forecasting consultancy. ■ Speaker Biography Brian PearceIndia Indonesia China Brazil Turkey Mexico US Russia UK Germany Japan Overall growth ■ Living Standards ■ Population & Dermographics ■ Other ■ -2% 2% 6% 10% 14% DRIVERS OF PASSENGER GROWTH 2014 2034 %CAGR SELECTED COUNTRIES
  7. 7. 8 C rippled by financing issues and poor efficiency levels, the traditional airport management model is becoming increasingly challenging to sustain, hence leading to the rising need for privatisation. It is estimated that globally there are over 450 airports globally with some form of private sector participation. Besides United States, airport ownership has seen significant change across the world since 1987 when the United Kingdom became the first country to privatise some of its major airports, as shown in figure below: Developments in Global Airport Privatisations Last two years has seen very active privatisations across the globe with some of the larger ones in Portugal, Turkey and Latam region. An interesting trend emerging is the active participation of fund managers especially pension funds and sovereign wealth funds. The twist is the emerging trend of funds not just remaining minority passive investors but acquisition of complete operational entities e.g. Hochtief acquisition by PSP and OTPP acquisition of full control of Bristol airport. This trend could see emergence of SWFs and Pension funds with deep pockets and the confidence of operating capability. GLOBAL AIRPORT PRIVATISATIONS Sidharath Kapur, President & CFO (Airports), GMR GROUP Globally, financial constraints on the part of Government and increasing concerns to finance high-priority public services are the key drivers of Public Private Partnership in airport infrastructure. © 2014 GAD Review GLOBALPRIVITISATION
  8. 8. 9#GADAthens We are also seeing stray instances of renationalisation of airports in recent past. A sudden change in the ruling government, economic reasons and lack of investment by airport operator are key drivers leading to the nationalisation of already privatised assets. A few cases are the Male airport in 2012, three Bolivian airports in 2013 and Cardiff in 2013. While this does not appear to be a trend, it serves as a caution to airport operators to political risk overhang and ensure to take necessary steps to mitigate them through insurance and through demeanor. The value of any asset is dependent on the fundamentals of the business, its regulation and ownership structure. Airports are not so homogeneous assets that they can be straitjacketed into a narrow valuation range. However broadly over past few years the range has been around 10-18 times EV/EBITDA with the trend moving towards the higher end of the range though with flashes of unbridled aggression in bids like the Brazilian airport bids. Nevertheless as aviation sector strengthens, it is expected the valuations will move higher going ahead. The year 2014 and going on to 2015 will see continuation of privatisations in traditional markets like Latam and Europe along with opening of newer markets opening up like South East Asia, Japan, Philippines and Africa. Recent Developments in Indian Airport Privatisation India has been in the forefront of airport privatisations and almost two third of passenger capacity in India lies in private hands in Delhi, Mumbai, Bangalore, Hyderabad and Kochi airports. The decision of Government of India to privatisation has proven fortuitous in changing the face of aviation infrastructure in the country to world class, modernized and efficient airports resulting in significant benefits for passengers, airlines and the government. Delhi airport has been adjudged as the second best by ACI in the 25-40 million passengers per annum (MPPA) category for many years. Mumbai Airport is the fifth best in the list. Hyderabad has won second best service quality award in the 5-15 MPPA category. Privatisation has also contributed significant cash to Airport Authority of India (AAI), the government arm for airport ownership thus giving it the cash chest to modernise airports under its control and also bring aviation infrastructure to far flung areas of the vast geography of India. It has also improved the perception of India in the global infrastructure sector. As per the terms of the privatisation, the AAI retains minority stake in JV Company; leaving majority control with investors. AAI has earned USD1.7 billion in revenue share from PPP airports since FY2007. Buoyed by the success of privatisations, in September 2013, AAI announced upcoming © 2014 GAD Review GLOBALPRIVATISATIONGLOBALPRIVITISATION 1987: BAA 1990-92: Liverpool, Prestwick, Southampton, Vienna 1993-96: Athens, Belfast, Cardiff, Cochin, Copenhagen, London City, Bournemouth, East Midlands 1997: Birmingham, Bolivia, Brisbane, Bristol, Dusseldorf, Istanbul, Kent, Melbourne, Naples, Perth, Rome, Sanford 1998: Asur (Mexico), Adelaid, Argentina, Auckland, Canberra, Costa Rica, Eindhoven, Netherlands, Hanover, Hobart, Luton, Malaysia, Skavska Sweden, South Africa, Wellington 1999: Jakarta, Stewart (New York) 2000-03: Bangalore, Hyderbad, Narita, Fraport, Lima, Malta, Sydney, Zurich 2004-06: Firenza (Italy), Larnaca (Cyprus), Brussels, Bratislava (Slovakia), Budapest, Delhi, Mumbai 2007: Dublin, Pisa, St Petersburg, Hamburg, Athens, Ecuador, Aeroports de Paris 2008: Brisbane, Belfast City, Blackpool 2009-10: London, Gatwick, Bristol 2011-14: Aeroportos de Portugal, Belgium, Stanstead (London), Brazilian Airports: Rio de Janerio’s, Belo Horizonte’s Cofin, Sâo Paulo Guarulhos Govenador, Viracopos, Campinas, Brasila Presidente Jusilino Kubitscheck PRIVATISATION TIMELINE
  9. 9. 10 @GAirportD privatisations for six more airports including Chennai, Kolkata, Lucknow, Ahmedabad, Guwahati and Jaipur. However the tender process has been postponed many times due to a lack of preparation with respect to the draft concession agreement and the revenue sharing and tariff structure framework. The RFQ for proposed Navi Mumbai airport (the second airport for Mumbai) has also been issued in February 2014. But the project continues to face a number of challenges. These relate to land acquisition and the absence of convenient surface connectivity between Greater Mumbai (where the majority of the residents live) further complicated by issues of project cost, shifting of traffic and of course regulatory issues. It is difficult to imagine privatisation of Navi Mumbai under single till regulation. This leads to the issue of weakness of India’s privatisation programme. The regulatory policy of single till adopted by AERA, the airport regulator, is detrimental to long term privatisation and making future privatisations attractive. The single till policy forced on early stage privatisations of Hyderabad and Bangalore airports have impacted their profitability and long-term returns. The erratic policy of AERA on land development, which is permitted as part of privatisation, exacerbates the woes of private operators. Thus while privatisation has given fantastic airports, the same cannot be said to be true of the balance sheets of private airport operators which have been acquiring a distinct glow of red. FY07 FY08 FY09 FY010 FY011 FY12 FY13 FY14 0.0 5.0 10.0 11.0 12.0 13.0 14.0 Deli Mumbai Bengaluru + Hyderabad Source: C.A.P.A. (Centre for Aviation, AAI) Revenue share paid by private metro airport operators to AAI Financial Year 2007 - Financial Year 2014 © 2014 GAD Review GLOBALPRIVITISATION  Mr. Sidharath Kapur is the Chief Financial Officer of Airports Sector of the GMR Group since May 2009. The GMR group operates 3 airports viz Delhi, Hyderabad and Male airports and has significant shareholder interest in the Istanbul Sabiha Gocken airport. ■ Speaker Biography Sidharath Kapur “The United Kingdom became the first country to privatise some of its major airports.” SIDHARATH KAPUR Monday 17th November, 10.30 Meet the New Owners: The Deals of the Year 2014 SPEAKER SESSION DETAILS The United Kingdom became the first country to privatise some of its major airports.
  10. 10. The 2005 airport law The law adopted on the 20th of April 2005 related to French airports was the first stage of the rocket giving key tools to create airport companies. Local Chambers of Commerce and Industry, which used to be the historical concessionaire, must take the initiative to create the local airport company. The airport company is granted to a long term concession period (maximum 40 years).When the airport company is created, shareholders are only public bodies including the State (60%), the local authorities (15% together) and the local Chamber of Commerce (25%). In April 2007, three airport companies were created in Lyons, Toulouse and Bordeaux. Nice was created one year later. From 2009 to 2014, 7 other companies were formed and this was a great success. Today, all French airports are currently managed in this new framework. Seven years after their creation, it is possible to have a clear vision for these companies. The change in status was clearly a success for airport management. As an example, it is easier to anticipate signifiant investments which is promoted by a long term concession period. The concessionaire is now responsible for a wide range of activities including the runway integrity with the exception of ATC. Privatisation is now a reality for French Airports In 2014, the French Government has finally decided to open the capital to private investors. The first airport to be partially privatised is Toulouse. There is currently a fully open call for tender and at this point we know that it has attracted a dozen of major competitors. For the time being, only 49,9% of the capital retained by the French State will be sold. In about 2/3 years, the State will decide to sell the remaining 10% with the possibility for the successful bidder to get full control of the company. Conclusion If this call for tender is successful, it is quite possible to imagine that other French Regional Airport will be also privatised. In the beginning of 2015, that could be a possibility for Nice or Lyon in particular. For a long time, privatisation of French airports was considered as an utopia. It is now a reality. Hopefully it will be positive, not only for investors but also for customers and for the entire local development. FRENCH REGIONAL AIRPORTS. A LONG WAY TO PRIVATISATION. Jean-François Guitard, Director International Development Aeroports de la Cote D’Azur © 2014 GAD Review GLOBALPRIVATISATIONGLOBALPRIVITISATION  Jean-François Guitard joined Nice Airport in 1991 as a market research manager. In 1997, he became network development manager. In 2000, he was appointed as Director of Airports Management Studies for the Chamber of Commerce & Industry of Nice. His job consisted to coordinate studies and research on behalf 11 other major French Chamber of Commerce & Industry and to promote a brand new status for major regional French airports (airports companies). He is the writer of the 60-page white paper relating to this new status and an other one published in 2009 related to the privatisation process of these airports. He is currently Director for international Development of “Société des Aéroports de la Côte d’Azur” in charge of institutional representation outside France of the airport and the development of foreign airports activities and also still involved in the process of creation of airports companies in France. ■ Speaker Biography Jean François Guitard “The first airport to be partially privatised is Toulouse.” JEAN-FRANÇOIS GUITARD Wednesday 19th November, 08.15 Breakfast Briefing: Privatisation of French Regional Airports Wednesday 19th November, 17.00 Creating an Airport To Airport Business SPEAKER SESSION DETAILS
  11. 11. 12 Brazil has experienced massive changes in the civil aviation sector during the last decade. Between 2003 and 2013, the number of passengers grew on average 11% per year, reaching 203 million passengers in 2013. © 2014 GAD Review GLOBALPRIVITISATION T his advance results from a combination of diverse socioeconomic and competitive factors: economic growth (3.7% annual average GDP growth from 2003 to 2013); liberalization of the aviation market (no intervention from government on air fares and routes since 2002); average domestic air fares reduction (45% drop since 2002 – real terms); new companies operating with different business models, among other changes. Moreover, the expectation of the industry is that this growth process will remain in the coming years. According to the Brazilian Association of Airlines, the industry expects to double its operations until 2020, in relation to 2012, and experience a 58% increase in cargo transportation in the same period. To do so, however, a 24 billion dollars investment is estimated to be necessary in airports infrastructure. To address this reality, we have promoted a profound change in the airport operating and funding model, breaking the state company Infraero’s virtual monopoly after 2012. In fact, Infraero airports held 97% of scheduled air transportation in Brazil until then. The new institutional arrangement is based on the concessions of the largest public airports to private sector through a model which sought to accelerate investments, improve airports capacity, enhance service quality and stimulate competition between operators. Therefore, in 2012, the airports of Natal (greenfield), Guarulhos - São Paulo, Viracopos - São Paulo and Brasília have been transferred to the private sector. Recently, two other important airports have also been transferred to new concessionaires: Rio de Janeiro - Galeão and Belo Horizonte. 91.8 million passengers GUARULHOS BRASÍLIA VIRACOPOS NEW NATAL FEATURED BRAZILIAN AIRPORTS THAT HAVE EXPERIENCED CHANGES AVIATIONINBRAZIL ChangesAnd Opportunities InABoomingMarket RogérioTeixeiraCoimbra,RegulatoryPolicySecretariat,CivilAviationSecretariat
  12. 12. 13#GADAthens© 2014 GAD Review have travelled six airports in 2013. After these concessions, Infraero’s market share dropped from 97% to 50%. On average, the auctions of those airports have registered premiums of almost 300%. Indeed, the Brazilian airports concessions were contested by a high number of operators from all over the world. All the resources raised with the auctions (almost 19 billion dollars divided over the years of th e concessions) are directed to the National Civil Aviation Fund, which is used to develop Brazilian civil aviation. Nowadays, most part of it is being invested in 270 regional airports. The estimated total investment in those airports exceeds 10 billion dollars for the entire period of the concessions (20-30 years, depending on the airport). In the first two years, the concessionaires that began operations in 2012 have already invested about 2 billion dollars, increasing capacity in 45 million passengers per year. The pictures show that new passenger terminals were delivered, as well as new road accesses, aprons and runways systems. The results above and the high interest revealed by investors in the Brazilian airports concessions demonstrates that it is a successful model and, considering the extension of the country and the existence of around 700 public airports, a continuation on this process is expected, with significant public investments in regional airports and the concession of other important airports to the private sector. We strongly believe in a very promising future for Brazilian civil aviation. GLOBALPRIVATISATIONGLOBALPRIVITISATION 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 0 30 100 150 200 250 203 193 180 155 128 113111 102 96 83 71 Air Transport Demand in Brazil (Million passengers) CAGR:11,1% (2003-2013) Source: ANAC Brazilian Civil Aviation Agency  Rogério Teixeira Coimbra is a civil servant specialist in policy and governmental management. He is graduated in Management and postgraduated in Management of Civil Aviation both of them by the University of Brasilia. Since 2004 he works in government offices charged with the regulation of civil aviation. Besides, he is member of Air Transport Regulation Panel of International Civil Aviation Organization - ICAO. Nowadays, Mr Coimbra is Secretary for Civil Aviation Regulatory Policy and member of the Board of Director of Viracopos Airport concessionaire’s. ■ Speaker Biography Rogerio Teixeria Coimbra ROGERIO TEIXEIRA COIMBRA Monday 17th November, 18.00 Champagne Roundtable: Brazil Third Round Concessions Tuesday 18th November, 17.10 24 Months On: Brazil Case Study SPEAKER SESSION DETAILS
  13. 13. 14 @GAirportD © 2014 GAD Review The Aeroporti di Roma - Atlantia deal was one of the biggest transactions of 2014. How has AdR’s strategy changed in light of its new ownership?  I don’ see a change in strategy, but a change in the effectiveness to pursue our strategy. ADR faces a growth story made of robust traffic potential, of a major infrastructural development plan and of promising non-aviation opportunities. Leveraging on Atlantia capabilities will be value add on this path, when it comes to efficiently access financial markets, to safely and timely execute investments and to address international growth opportunities. Some of the other airport leaders participating at GAD will also be going through a sale in the coming months. What is the one thing that you have learnt from the process that you would pass on as a piece of advice to them?  ADR’s new shareholder actually resulted out of a merger process, possibly more sensitive and complicated than a typical trade sale procedure. In any case, taking time to work on an effective and convincing equity story, with distinctive and clear key value drivers, is always of the essence before commencing talks with any potential buyer.  From the dominance to Ryanair to the struggles of Alitalia and its potential equity relationship with Etihad, the Italian market is at the centre of changes in the European airline industry. How are you going about delivering infrastructure for the long term when your airline customer base and its requirements are changing so fast?  Indeed we are seeing more and more interest from many fast growing carriers, which combined with the envisaged stabilization of Alitalia, provides sufficient peace of mind when it comes to engage long term commitments to build up capacity. Our challenge will be then to properly ensure operational flexibility to respond to all needs and requirements as they unfold in our assorted airlines base The corporate finance environment seems to be quite benign at the moment. Where do you think the next big shock could come from?     Don’t see dangerous bubbles looking ahead; certainly certain sovereign dynamics may be matter of concern, especially in relation to the long wait for global growth to restart at an healthier pace soon, with a firmer contribution by core European countries and with especially more momentum from far east emerging markets There is clearly an increasing appetite for private infrastructure debt. How does the changing investor base change things from your point of view as CFO?  In particular, we are observing increasing interest from long term investors, such as insurers or pension funds, attracted by an asset with a relatively safe future, thanks to promising perspectives on traffic flows and a stable and clear regulatory framework. Certainly, we see with favour stable and ‘real-money’ players carving out more space in our investors base in lieu of more speculative operators You previously served as leader of ADR Retail and ADR Mobility (Parking & Mobility services). The last few years have a seen a lot of light and heat about these parts of the airport business. In your view, where is the best return on investment to be found?     Based on the experience built both on ordinary business and special situations, probably the retail segment offers better opportunities to extract value, working on synergies, cost efficiencies, sales effectiveness and excellence in category management. Other non-avio segments, like parking/mobility or advertising, usually offer relatively less improvement AIRPORTLEADERINTERVIEW THE GAD REVIEW INTERVIEW: MARCO TRONCONE CHIEF FINANCIAL OFFICER OF AEROPORTI DI ROMA
  14. 14. potential, besides being more exposed to the specific domestic economic situation One of the hot tends at GAD this year is the digital economy. To what extent do you think that this is a genuine game changer for the airport sector?     To the extent it will help airport operators to devote more focus on the passengers community, beside the traditional airline customers. Achieving and managing direct contact with our end users, will help in understanding needs and desires and ultimately increase perceived quality, often behind actually delivered service level, and extract more value from all non-avio businesses. If you hadn’t taken the professional route that you did take, what other occupation would you like to have followed?    I like being on business, don’t see myself in some other exotic occupation: maybe less quantitative than acting as CFO, but by no means less based on logic and fine negotiation when it comes to deal making, is the role of the business lawyer, in principle an interesting alternative.© 2014 GAD Review AIRPORTLEADERINTERVIEW  Marco joined Aeroporti di Roma in 2011, where he is currently CFO as well as responsible for Strategy, Regulatory and Corporate Development. Before then, Marco has served ADR as Board Member, while Investment Director in Sintonia SA, responsible for portfolio management and M&A in the infrastructure sector with a focus on airports. Marco started his career with AT Kearney where he spent 12 years focusing on infrastructure, energy and TLC industries; he holds an MBA and a degree in chemical engineering. ■ Speaker Biography Marco Troncone MARCO TRONCONE Monday 17th November, 10.30 Meet the New Owners: The Deals of the Year 2014 SPEAKER SESSION DETAILS
  15. 15. 16 N ew technology is largely aimed at improving operating economics, which directly affects airline profitability. Fuel is expected to remain the largest component of airplane operating costs so development efforts focus on reducing fuel consumption. The latest generation of Boeing airplanes—the 787 Dreamliner, 747-8, and the upcoming 737 MAX and 777X—reduce fuel consumption by double- digit percentages compared with earlier generations. Developments in engine technology drive much of the improvement. Advances in wing design also contribute to better fuel efficiency. The composite wings of the 787 and 777X permit aerodynamic improvements that could not be achieved with conventional materials. The 777X features folding wing tips that allow increased wingspan in flight for better efficiency while maintaining Code E airport compatibility on ground. Improved engines, aerodynamics, and systems also reduce noise as much as 30 percent on the 747-8. Many developments that reduce fuel use also improve range and payload capability. Increased range coupled with improved efficiency enables airlines to expand their networks. Adding new destinations provides access to new revenues and often accelerates economic growth New technology is largely aimed at improving operating economics, which directly affects airline profitability. Fuel is expected to remain the largest component of airplane operating costs so development efforts focus on reducing fuel consumption. NEW GENERATION AIRCRAFT: IMPACT ON AIRLINE PROFITABILITY Dr. Fariba Alamdari, VP, Marketing, Boeing Commercial Airplanes © 2014 GAD Review NEWGENERATIONAIRCRAFT
  16. 16. in these markets. The 787 is opening new routes that were not economically viable before. Increased payload capability allows airlines to carry additional passengers and cargo. The 777X carries more payload which improves profit potential. New technologies also improve airline operations through less frequent checks and longer life. For example, 787 and 777X composite floor beams do not corrode and have longer inspection intervals. Boeing looks for technologies that further the industry-leading reliability of its airplanes. The 777X leverages the system architecture of the 777-300ER which has a 99.5 percent schedule reliability. Interior innovations enable airlines to carry more passengers while improving passenger experience. Larger and higher windows, sculpted sidewalls and higher ceilings give a more spacious feel. Larger, easier-to- open bins are more convenient for flight attendants and enhance the passenger experience. The 787 maintains a lower cabin altitude with improved air purity and more comfortable cabin humidity. The 787s innovative LED lighting helps airlines differentiate their brands. These features make flying more enjoyable. Over its history, growth in commercial aviation has been resilient and consistent. Ever-improving airplane efficiency, capability, and technology have helped generate this growth, giving passengers more flexibility through expanded networks and increased frequencies. Going forward, new generation airplanes will continue to drive growth and help the market to innovate in ways we can only imagine. 17#GADAthens© 2014 GAD Review NEWGENERATIONAIRCRAFT  Dr. Fariba Alamdari, Vice President of Marketing for Boeing Commercial Airplanes, leads a broad team of experts who support Boeing’s product strategy and sales of aircraft and services. From 2010 to 2013, as vice president of Marketing and Value Analysis, Alamdari was responsible for Commercial Airplanes’ go-to-market strategies in regions around the world, as well as analytics, modeling and simulation in support of sales and product development. From 2006 to 2010, as vice president of Future Markets, Alamdari led the Current Market Outlook forecast team and was responsible for economic and financial analysis, airline revenue analysis and network fleet planning. She also led the operation and development of the Customer Experience Center. ■ Speaker Biography Dr.Fariba Alamdari “Boeing looks for technologies that further the industry-leading reliability of its airplanes.” FARIBA ALAMDARI Wednesday 19th November, 11.15 Generation Z SPEAKER SESSION DETAILS
  17. 17. 18 @GAirportD © 2014 GAD Review LONDONAIRPORTCAPACITYDEBATE G atwick’s vision is of two world class airports in London. We want to see Gatwick grow and, by fostering true competition in the market, Heathrow improve. As connections to emerging markets become more important, and the UK’s core European markets continue to grow, London needs a network of airports, enabling it to function as a true global city and the UK economy and tourism to thrive as a result. Major global cities – New York, Paris and Tokyo - have networks of airports. They do not rely on a single mega-hub. Mega-hubs tend to be based in smaller cities that are less significant global destinations and have smaller populations. The UK needs some hub capacity but crucially the amount will decline. Transferring passengers represent around 14% for London as a whole today, but this is projected to fall to 9% by 2050. Behind this change is the ongoing transformation in the aviation sector. Aircraft can now fly longer distances direct, so fewer passengers will need to transfer. Gatwick can provide the lower costs and efficient service to cater for this next generation of airlines - helping keep the UK competitive as its proportion of transfer passengers shrinks. London is one of the best connected cities in the world and this position derives from the strength of its airport system as a whole. Gatwick’s vision is the model that will best serve the London of the future. Two world class airports in competition with each other will help deliver the connectivity and economic growth the country needs. Competition will deliver better service and cheaper fares for passengers - liberalisation has been at the heart of the UK’s aviation success in recent years and the UK now has the opportunity to plan for the next chapter in this success story. Building a new runway at Gatwick would deliver more choice, lower fares, and the economic growth the UK needs at an environmental cost it can afford. LONDON NEEDS TWO WORLD CLASS AIRPORTS Contributed by Gatwick Airport  Nick Dunn was appointed to the Board of Gatwick Airport Limited as CFO in April 2010 following the acquisition of the airport by a consortium of private equity and infrastructure funds. Nick joined from Anglo American plc where he was General Manager of Corporate Finance. ■ Speaker Biography Nick Dunn LONDON DEVELOPMENTS NICK DUNN Monday 17th November, 17.00 Debt Financing: Things I Wish I’d Known Tuesday 18th November, 10.20 The London Airport Capacity Debate SPEAKER SESSION DETAILS
  18. 18.© 2014 GAD Review LONDONAIRPORTCAPACITYDEBATE LONDON DEVELOPMENTS S ome say the hub model is dead and the future lies with “hub-busting” 787 Dreamliner aircraft which can make long distance point to point flights viable. But the thought that aircraft will be able to undermine network economics forgets fundamental basics of how hubs work. Hubs are the most efficient way of connecting people and things - whether it’s the great rail junctions of the world, shipping ports, mobile or digital networks. Even Google and Facebook operate on the basis of network economics.  The equation is simple - connecting ten destinations to each other via a hub requires only 9 flights.  Connecting ten destinations to each other through a point-to- point airport requires 45 flights. The point-to-point airport model is not only ecologically wasteful, but financially unviable for long-haul connections. That’s why almost all 787s have been ordered by network carriers who operate from a hub. 787s may allow network carriers to fly more “thin” routes to smaller markets from their hubs, increasing competition and choice for passengers.  If anything, this will strengthen the position of the leading hubs, and may accelerate industry consolidation. The global landscape is changing and the growing economies are almost all in Asia and the Americas - markets you can only get to by air from Europe. That’s why France, Germany and the Netherlands have all invested heavily in their hub airports. Istanbul, and Dubai are building new ones. Political delay has hamstrung the airports debate in the UK for many years. But the tide is turning and two years ago, the UK Government established an Airports Commission to recommend how to the keep the UK as an aviation hub. New technology, such as the 787 is making aviation cleaner, quieter and more sustainable - and making Heathrow expansion politically deliverable. Heathrow is today one of the world’s leading hub airports, handling a quarter of British exports. Expanding Heathrow will allow us to build on this strength.  Nigel leads Heathrow’s Public Affairs and Community Relations teams. His responsibilities include managing Heathrow’s relations with politicians, government officials, business groups and the community around Heathrow; co-ordinating Heathrow Airport Ltd position on policy issues; and liaison with local authorities, the UK Government and the European Commission on a range of policy issues which impact on Heathrow. Nigel represents Heathrow Airport Ltd on a wide range of trade associations and lobbying groups. ■ Speaker Biography Nigel Milton THE MYTH OF THE HUB-BUSTER AIRCRAFT Nigel Milton, Director of Policy and Political Relations, Heathrow Airport NIGEL MILTON Tuesday 18th November, 10.20 The London Airport Capacity Debate SPEAKER SESSION DETAILS
  19. 19. 20 D espite its capacity constraints, Heathrow retains the highest business connectivity score amongst major European hubs, and is at the end of seven of the top ten business routes in the world. It is therefore the obvious choice for securing the UK’s future global connectivity. A virtuous cycle has seen business choosing to locate close to Heathrow, in turn providing airlines with an affluent catchment with a high propensity to fly. Market signals could not be clearer. Given the choice, airlines choose Heathrow over Gatwick, even when securing slots comes at a high price. If expanding Heathrow is the obvious answer for the UK, why then has the airport debate been so prolonged and difficult? Our Heathrow Hub proposal overcomes what we see as the five critical flaws in previous proposals. First, by retaining existing centerlines and extending one of the existing runways to provide two in-line runways, separated by a central safety zone, no new communities are brought into the airport’s noise footprint. By allowing early morning arrivals to land on the deeper runway we also reduce noise impacts for many communities under the flightpath at this most sensitive time of day. Second, our proposals avoid widespread demolition of local communities, and require far THE UK’S KEY ECONOMIC ASSETSteven Costello, Director of Heathrow Hub © 2014 GAD Review LONDONAIRPORTCAPACITYDEBATE Heathrow is a key UK economic asset, directly responsible for around 1% of GDP - more than any other single site and as important to the national interest as the English language, time zone and rule of law. LONDON DEVELOPMENTS
  20. 20. less landtake than alternatives. Third, the inherent efficiency of our masterplan reduces capital cost and therefore maintains competitive user charges. The permeable airfield layout also allows fast turn-rounds and minimal taxiing distances, reducing airline operating costs. Fourth, our proposals radically improve rail access to Heathrow, shifting traffic from road to rail and reducing congestion on the local road network, which includes some of the busiest roads in Europe. Following the example of airports such as Charles de Gaulle, Schiphol and Frankfurt, we place the airport on the main rail network, dramatically increasing train frequencies and range of destinations served. Fifth, direct rail access allows areas outside London and the South East, including some of the most economically disadvantaged regions of Europe, to benefit from access to global markets. It also avoids the risk of overheating the already hugely successful economic engine of west London and the Thames Valley. This also provides passengers in the UK regions with a real choice, either using regional airports to connect via European hubs, or using rail to fly direct from Heathrow. Increasing choice in this way improves regional competiveness. Equally importantly, it transforms inward investor perceptions of the UK regions as well-connected business locations. In an increasingly connected and competitive world, Europe may already have too many major airports. It seems unimaginable that the UK would consciously seek to constrain the future success of Heathrow and its surrounding economies. Heathrow is the obvious place for securing the UK’s hub status and Heathrow Hub the logical choice. 21#GADAthens© 2014 GAD Review LONDONAIRPORTCAPACITYDEBATE  Steven Costello is a Director of Heathrow Hub Ltd and Runway Innovations Ltd, the companies responsible for developing and promoting independent proposals for Heathrow expansion. His previous experience as an architect includes London’s first privately financed railway station at Imperial Wharf, and airport projects in Bahrain, St Helena, London (Heathrow) and East Midlands. He also led the environmental strategy for the UK Met Office’s new headquarters in Exeter, advised the Football Association on selecting the site for their new national academy, participated in EU-China sustainability programmes and provided long-term strategic advice to a global hospitality company. Steven has also developed a property company with a diverse range of assets in the UK and Europe. He lives directly under one of Heathrow’s main westerly departures flight paths. ■ Speaker Biography Steven Costello “If expanding Heathrow is the obvious answer for the UK, why then has the airport debate been so prolonged and difficult?” LONDON DEVELOPMENTS STEVEN COSTELLO Tuesday 18th November, 10.20 The London Airport Capacity Debate SPEAKER SESSION DETAILS
  21. 21. 22 @GAirportD © 2014 GAD Review LONDONAIRPORTCAPACITYDEBATE LONDON DEVELOPMENTS T his is the debate happening around South East airport capacity and a raft of other strategic policy choices facing our country, all deeply intertwined with lively conversations about regional devolution and the need to rebalance the British economy. On the Heathrow side of the argument we hear talk of hubs and the UK brand and, on the Gatwick side, we are hearing more about choice and competition. So, which is best for Britain? To ensure we go in the right direction for the whole of the UK, we need to look both at aviation trends and broader national conversations. On the aviation side, emerging markets are moving eastward and, coupled with new hub-busting aircraft, this is making UK hub capacity less important for connecting the country’s cities to global opportunities. If we look wider than this, we can see that communities up and down the UK are crying out for the rebalancing of the country’s opportunities for growth – and this includes opportunities for long-haul connectivity. Businesses are demanding new routes and, wherever they are in the UK, they want to direct and they want their customers to be able to fly direct to and from as close to where they live and work as they can. For the sake of the whole of the country’s economy, UK investment must follow the national demand for regional growth and these global trends in aviation. Growing an old fashioned hub will go against our direction of travel. Growth at Gatwick will support what people want – improving value for passengers flying from the South East and supporting the continued growth of our regions, including through long-haul airports like Birmingham. DEVELOPMENTS IN AND AROUND LONDON Paul Kehoe, CEO, Birmingham Airport UK PLC or the future of the UK economy? Selling the UK brand from London, or enabling businesses across the country to sell goods and services to the world.  Paul Kehoe joined Birmingham Airport as Chief Executive Officer in October 2008 He started his career in aviation as an air traffic controller in the Royal Air Force and has worked for a variety of companies in the industry including British Aerospace plc, Serco Aviation and TBI plc. during his 25 year career in civil aviation. ■ Speaker Biography Paul Kehoe PAUL KEHOE Wednesday 19th November, 15.00 On Time & On Budget SPEAKER SESSION DETAILS
  22. 22. I t is a niche business, in that some 65% of those using LCY are travelling on business and 63% are inbound, having bought their ticket at the other end of the route. Airports don’t have a God- given right to the passengers and airlines they serve. 75% of airports with 5 million or less passengers in Europe are loss making – in fact, 44% of all airports in Europe are loss making (up 4% in 2 years). Every airport offers passengers access to air travel – but is this really enough to guarantee survival? Understanding, communicating and delivering on your airport’s passenger proposition is crucial to your success. It’s all you have to make you stand out from the crowd. You must protect it at all costs. LCY has developed a passenger proposition based on four pillars - location, network, customer service and – most importantly - speed of transit. It should take no more than 20 minutes to get from front door to the departure gate, and no more than 15 minutes from tarmac t0o train. We call it the 20:15 promise – and it’s a promise that presents an obvious challenge. How could we know if we were delivering? Several technologies were trialled to measure the time taken for passenger journeys on departure and arrival. All worked - to a degree – but only one, CrowdVision (the technology used to monitor crowding during the annual Hajj at Mecca) was accurate enough to allow us to understand the timing of each step of every journey. Through specially installed data-capturing ‘cameras’, the CrowdVision system tracks each journey through the airport, second by second, metre by metre and completely anonymously, breaking it down into discrete stages so that pinchpoints and blockages can be identified and dealt with. The information gathered is presented in a simple graphical interface which allows staff to understand whether the airport is delivering its 20:15 promise in real time. Understanding how and if we deliver the time-based element of our proposition is only the beginning. We are just starting to come to terms with the richness of the data generated from understanding how passengers use our terminal and the opportunities are incredibly exciting. PATRICK BURROWS Thursday 20th November, 10.15 Passenger Experience & The Smart Airport Experience SPEAKER SESSION DETAILS© 2014 GAD Review THEINTERNETOFTHINGS THE SMARTER AIRPORT EXPERIENCE Patrick Burrows, CFO, London City Airport “ It should take no more than 20 minutes to get from front door to the departure gate.” London City Airport (LCY) is the only London airport actually in London, handling around 70,000 flight movements and 3.5 million passengers every year.  Patrick joined London City Airport in June 2011. The majority of Patrick’s career has been spent in retail, where he developed a keen customer focus. Patrick was attracted to London City Airport by its unique passenger proposition. Patrick joined Tesco in 1994 and over the next 14 years he consistently drove sustainable profit growth through a variety of Finance Director positions covering, Tesco’s construction, Thai and convenience divisions amongst others. He delivered substantial cost savings as a Procurement Director, as well Finance Director. Wanting to work in a private equity environment, Patrick became Group Finance Director of the UK’s largest women’s fashion retailer New Look in 2008. He led the finance streams of New Look’s 2010 IPO process ■ Speaker Biography Patrick Burrows
  23. 23. 24 T his has frequently placed the issue of State Aid under the spot light. Transport accounts directly for circa 3.7% of European GDP and 5.1% of employment. *1 The indirect impact is far greater. The calculation of direct and indirect economic benefit of the development of air transport is often used for political and local ammunition in the argument for air transport development and the justification for financial support/State Aid. State Aid is defined as “an advantage in any form whatsoever conferred on a selective basis to an undertaking by national public authorities”*1. There is evidence to show that without stimulating the growth of air transport through financial support, many airlines would not take the financial risk of opening up new routes, often in secondary airports. This model has now expanded across airports in general where some sort of financial incentive is often required by the airlines to mitigate riskier route development. There are a number of the smaller regional airports with predominantly low cost airlines which have struggled to show direct economic benefit and profitability in the short term whereas the indirect wider economic benefits are often far reaching. In one European airport with a based low cost based carrier, due to the financial support required to support the route development, the airport is forecast to break even in the 9th year of its operation yet the regional benefit of inward traffic and investment has been important for the region’s GDP and development. A maintenance base has been created (MRO) in the same airport. DO STATE AID RULES NEED TO BE SIMPLER? Paul Whelan, Director, LCAG & Strategy Consultant, ADRIA Airways © 2014 GAD Review STATEAIDFORAIRPORTS The growth of European regional airports which has been stimulated by the increase of affordable travel since the mid-1990s has been partly supported by financial aid given by regional stakeholders to airlines and airports.
  24. 24. MRO facilities when grown will use some of the traditional engineering skills coupled with software composite material technologies and computerisation creating jobs and new skills and clusters of new industries. The overall economic benefit is far reaching for the region and the country. Without financial aid development would have been limited and arguably non-existent. The State Aid rules have long been prohibitive because it can give the recipient of incentives advantages on a selective basis and competition could be distorted. Despite the EU reviewing regularly the State Aid rules, aid can only be implemented after approval by the commission. Moreover the Commission has power to recover incompatible State Aid. If the EU considered giving more powers on a self-regulatory basis it could speed up the investment processes and stimulate more inward investment. *1 – Source: European Union Website October 2014 25#GADAthens© 2014 GAD Review STATEAIDFORAIRPORTS  Paul is a well-established international Corporate Financier, Chairman and Managing Director with proven Board level experience particularly in the aviation sector. He has privatised several European airports and acquired, managed, developed and sold a number of regional airports and airlines. He has established two new airlines in the UK and Italy. As a consequence of this lengthy experience in the European aviation industry, he has an extensive high level contact base across the European airports and airlines. He is often called upon by airports, airlines and aircraft owners to identify joint venture partners, code share partners, investors and acquirers. Paul has advised and implemented many mergers, acquisitions, management buy-outs, and is currently advising and managing several aviation ventures ■ Speaker Biography Paul Whelan PAUL WHELAN Wednesday 19th November, 17.00 In House or Outsource? The Dilemma For Regional Airports SPEAKER SESSION DETAILS
  25. 25. 26 @GAirportD © 2014 GAD Review MEETTHEGADTEAM SAYHELLOTO TEAMGAD Say hello to the staff that have brought this issue of GAD Review to life. Heidi Stancliffe GAD Conference Director Amos Rojter Head of Digital Media Ian Law Business Development Manager Rachel Bo Logistics Manager Elisabeth Wood Creative Director
  26. 26. SOCIAL NETWORKING EVENTS Champagne Roundtables Monday 17th November 18.00 Round up the day with an informal small group discussion hosted by one of speakers. Champagne, networking and relevant, thorough industry discussion! Enjoy freshly prepared barista coffee whilst catching up with old friends or new contacts. The GAD Coffee House is brought to you by our co-hosts Athens International Airport and AviAlliance. Networking Drinks Receptions Conclude the day and wind down with relaxed networking The Investing In Airport Summit Mon 17th November: Hotel Grande Bretagne, 18.00 GAD Main Conference Day One Tues 18th November: Benaki Museum 18.10 (5 minute walk from Hotel Grande Bretagne) GAD Main Conference Day Two Weds 19th Nov: GAD Lounge, 18.00 L O U N G E T H E SIGN UP ON THE DAY TO RESERVE A SPACE AT THE TABLE OF YOUR CHOICE. Too-Hot-To-Touch Interactive Discussions Taking place strictly under the Chatham House Rule in a boardroom set-up, participants will be encouraged to speak openly, allowing for frank, honest and fruitful discussion between peers. Uncut! Monday 17th November 17.30 Are Investors Overpaying And Are Some New Owners Ever Going To Make A Profit? Tuesday 18th November 15.10 How Are Active New Owners Changing The Way Airport Strategy Is Determined – Are Key Relationships Now Being Managed At Investor Level? SIGN UP ON THE DAY TO RESERVE YOUR PLACE. LATE COMERS WILL NOT BE ADMITTED. Master Classes Essential context for anyone interested in the upcoming Greek and Japanese airport privatisations. Sign up on the day for the session of your choice. Monday 17th November 16.15 Getting To Grips With The Greek Economy Monday 17th November 16.15 The Japanese Privatisation Pipeline Meet The Investor Meet The CEO L U N C H T A B L E S Join one of our speakers for a relaxed sit-down lunch. Sign up on the day to reserve a space at your favourite speaker’s table. Monday 17th November 12.45 Meet The Investor Lunch Tables Tuesday 18th November 12.40 Meet The CEO Lunch Tables Breakfast&LunchtimeBriefings Learnmoreaboutsomeofthehottestopportunitiesintheairportpipelineoverbreakfastor lunch.ThisisforpeoplewhoreallywanttomakethemostoutoftheirtimeatGAD! FIRST COME, FIRST SERVED – NO NEED TO SIGN UP IN ADVANCE PPP For Hewanorra International Airport, St Lucia: Monday 17th November 07.30 Greek Airport Privatisations: Monday 17th November 13.00 New Indian Airport Privatisations & The Second Mumbai Airport: Tuesday 18th November 07.30 Privatisation Of French Regional Airports: Wednesday 19th November 08.15© 2014 GAD Review Sign up on the day - places limited to one attendee per company
  27. 27. 28 © 2014 GAD Review YOURIMPORTANTNOTES
  28. 28. June 2015 Kuala Lumpur Follow GAD on Twitter for more anouncements @GAirportD GAD 2014 attendees get a £200 discount off GAD Asia 2015 Bookings will open December 2015 – contact Quoting VIP Code: FKN2453GADAsia200 to register for your discounted place. Please note the £200 discount will apply to the full price at the time of registration. C O M I N G 2 0 1 5 Global Airport Development 2015 ASIA
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